It's been confirmed now that economist Sandeep Jaitly has been forced to resign his position from The Gold Standard Institute following his on-air remarks about Ludwig von Mises and Ayn Rand. Jaitly, a follower of Antal Fekete, originally tweeted that "If it ain’t Menger or his direct student Eugene [sic] Von BB, it ain’t Austrian. Sorry #Mises: respectfully, too many mistakes were made."

"Mises
didn’t look back to Menger’s original axiom which was that value is not
outside of your own consciousness. And he didn’t observe what Menger
observed about market action in the sense that there are always two
prices, there’s a bid and an offer. And von Mises didn’t like to admit
that interest was a market phenomenon. He sort of wanted to imply that
it’s a sort of natural consequence of not having a present good
basically. So to develop a theory of interest without going back to
Menger’s original observations is not continuing the tradition in the
Austrian way as we would see it."

Then, after much debate in the blogosphere, someone known as kdt posted this text purporting to come from The Gold Standard Institute on August 25th:

Lest there be any misunderstanding, the views expressed by Sandeep Jaitly in his interview with Max Keiser (http://maxkeiser.com/tag/carl-menger/)
are not the views of The Gold Standard Institute. To the contrary, we
strongly disagree with those views. There is no doubt that Ludwig von
Mises made mistakes; that should not diminish the respect due to a great
scholar. The mistakes of Mises are dwarfed by the enormity of his
positive contributions. The Institute believes that history will judge
Ludwig von Mises far more kindly than does Mr. Jaitly. The Ayn Rand
diatribe was of a tone that displayed little understanding of her
philosophy and needs no further comment. The philosophy of The Gold
Standard Institute has always been, and will remain, to debate and
promote ideas, not to attack people.

Sandeep Jaitly has resigned
from his position as Senior Research Fellow with the Institute and we
sincerely thank him for his past contributions.

Philip Barton
President

In
an email confirming the action, Sandeep Jaitly explained to me,
"apparently, they don't want to burn bridges," and I take this to mean
bridges with large benefactors and partners. However, Jaitly is unfazed
and vows to continue his work including a PhD acceptance speech on the
Ludwig von Mises split from Carl Menger and Eugen von Böhm-Bawerk
regarding certain aspects of interest rate theory.

I like Sandeep
because he challenges orthodoxy in a thoughtful way. Aside from the
illuminating monetary debate sparked by Jaitly, as a guest on the Keiser Report
myself, the forced resignation of an economist is both interesting and
disturbing. Frequently, I find myself challenging the orthodoxy of the
Mises' Regression Theorem on the origin of money when it comes to the
nature and value of bitcoin as money.

Mises has written that,
"Value is not intrinsic, it is not in things. It is within us; it is the
way in which man reacts to the conditions of his environment."

While
I and other Austrians wholeheartedly agree with Mises on this, the
notion of a decentralized bitcoin has eluded many in the economics
profession. Peer-to-peer bootstrapped currencies secured by cryptography
in a distributed computing project were not anticipated by Menger nor
Mises. They are a reaction to our 'politically-hostile' environment for
free market currencies. Public-key cryptography, as opposed to symmetric
key cryptography, is a relatively new phenomenon that Austrian
economics has not yet come to terms with.

Some may not like it, but bitcoin is a Mengerian-, Misean-, Rothbardian-, Austrian-currency in its purest form. Still actively debated within the Austrian economics community on whether or not bitcoin satisfies the regression theorem, I have gone so far as to propose a corollary.

It's
not surprising that this Max Keiser television dialogue caught the
attention of Austrian scholar Tom Woods who responded swiftly on LewRockwell.com.
According to Jaitly, Woods is still refusing to appear on a television
debate about the issues. I encourage Woods to accept Jaitly's offer to
appear and I also agree with John Robb
who said, "The only real debate that remotely matters between the Mises
faction and the Fekete faction regards their difference in perspectives
on the merits and pitfalls of the Real Bills Doctrine. That would make a
fine core issue for debate between Sandeep Jaitly and Joe Salerno or Guido Hülsmann."

As Lawrence White has pointed out,
while real bills circulation via discounting can function adequately as
a credit instrument in an environment of free banking, the Real Bills
Doctrine is a dangerous idea when applied to a central bank that has no
true market-based restrictions on issuance. The fractional-reserve free banking contingent
within the Austrian School would largely agree with this notion too.
(For the anti-fractional-reserve Austrian viewpoint on real bills,
please see Did Real Bills Enable the Growth of Trade? by Robert Blumen.)

Lately, I have become a regular reader of Dave Harrison's Trade With Dave, which covered Keiser's original interview
with Jaitly in July 2011. Dave also writes a lot about how the Austrian
School of economics is "being co-opted by the progressive political
movement through a very crafty scheme known as Libertarian Paternalism."
He sums up the entire Keiser - Woods, Fekete - Mises debate nicely:

"What
is relevant, at least from Dave’s perspective is how the debate
revolving around gold is most definitely rising in the consciousness
both inside and outside the Beltway. Just this week, as you probably
read, the Republicans are forming a 'gold commission' as part of their
official platform pre-convention. You can attack this subject matter on
lots of levels. There’s a debate at the lowest level that I would say is
where the powers that be in the Republican Party are coalescing around
the subject matter. There’s a debate at a slightly higher level between
the libertarians and libertarian paternalists which is how I would
describe the debate between Max and Tom and the Fekete – Mises smackdown
that I have provided numerous links to below. That’s a very interesting
and highly educational debate which I would encourage anyone who
wants to expand their mind should dive right into. But there’s a third
level to this debate. That level is about free will, [and...] human
consciousness."

1 comment:

bitcoin has intrinsic value -- its intrinsic value is its independence from manipulation by external forces.

funnily enough, that's one of the most important values gold has.

gold isn't money because it's shiny, nice, heavy and has uses in electronics. it's money because it is not manipulable, it is independent of governments, and can be trusted. the same can be said of cryptographic currencies.

if they can be trusted as a medium of exchange, then they have value. even if you can't hold a bitcoin in your hand or bite it.

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